• Deductible Gift Recipients and the new Government reform agenda

On Tuesday 5 December 2017, the Government announced its planned reform of the deductible gift recipients. This will be welcome news for many in the industry – but there’s more to be clarified. We analyse the changes.

The changes – a snapshot

Administration of DGRs is to be handed to the Australian Charities and Not-for-profits Commission (ACNC), rather than different registers being handled by a number of different government departments.

This is a smart decision to streamline the process as the ACNC does an excellent job, and it will go a long way to simplifying processes for DGRs and reduce duplication.

Public fund requirements are to be abolished which should also simplify things for charities otherwise required to have these separate arrangements.

The ‘in Australia’ legislative changes that have been pending since 2009-10 will not proceed. These measures had the potential to severely restrict valid overseas activities of some charities, so confirming their removal from the table is a positive step.

The proposal to require environmental organisations to spend a certain portion of their funding on environmental remediation activities, which effectively would have restricted their ability to fund other activities such as advocacy, has been scrapped. In addition, a requirement for the ACNC to publish charities’ declarations of political expenditure appears to be replacing the government’s push for further information regarding advocacy activities.

We are supportive of these moves on the basis that charitable status is about purpose, and a charity should be able to make its own decisions regarding how to best achieve that purpose.

The Government has promised to consult on the details for these changes and we look forward to continuing our involvement from this perspective.

More work required

Non-Government DGRs that are currently not registered as charities, will need to get themselves organised to qualify for registration. Registration with the ACNC is proposed to happen automatically from 1 July 2019, and a 12 month transitional period allowed for finalising compliance with the registration requirements. Some organisations may need changes to their constitutions and some may need other changes to meet the ACNC governance standards.

In our experience, whilst the process of registering with the ACNC can be very straight-forward for charities that fit nicely into one of the relevant categories, it can be far more onerous for organisations that are a little more ‘outside the box’. As a result, we expect that DGRs not currently registered will need to undertake significant work to meet the relevant requirements.

Our take on the changes

We consider the Government should focus less on referring to the ‘cost’ of deductions for donations. If the savings obtained through charities doing what would otherwise be the Government’s responsibility were factored in, we are confident there would be no such ‘cost’ to report.

Our team will continue to unpick the details of this reform and understand what it means for NFP organisations in a practical sense. Please get in touch if you want to discuss the changes in the context of your organisation.